ASX drops 1.8% as Credit Suisse panic sinks in

Australia’s stock exchange has dropped by 1.8 per cent off the back of the news that Credit Suisse is on the brink.

The Australia Stock Exchange dropped sharply on the open. Picture: iStock

Australia’s stock exchange has plunged by 1.8 per cent as fears grow about the health of the global banking sector.

The Australian Securities Exchange (ASX) dropped to 6929.8 on the open.

It plunged to a 10-week low as gloom spreads following the collapse of Silicon Valley Bank on Friday and news overnight that major European bank Credit Suisse is on the brink.

Miners and banks were the worst hit.

Early Thursday morning, CommSec, an arm of the Commonwealth Bank, warned that the ASX was expected to “drop sharply”.

The European stock market and Wall Street were also down as investors fret following the collapse of three American banks in the past week.

Credit Suisse, also appears on thin ice — its share price cratered by 20 per cent in overnight trading after a major Saudi investor said it would not provide additional funding.

The Aussie share market is expected to drop sharply on Thursday. According to the latest SPI futures, the ASX 200 index is expected to open the day 133 points or 1.9% lower this morning. #ausecon#auspol#business#commsec@CommSec

— CommSec (@CommSec) March 15, 2023

Trading in Credit Suisse, the world’s seventh largest investment bank, was suspended several times as the stock plummeted, sparking a worrying ripple effect as shares in other European banks also plunged.

Stocks in the Swiss bank fell to 1.68 Swiss francs – the lowest price in its history.

Credit default swaps for Credit Suisse — the cost of insurance against default — are nearing distressed levels.

Ray Atrill, the head of foreign exchange strategy and markets at NAB, said that anxiety about the banking sector was having a major impact.

“Financial instability centred on the banking system is back firmly to the fore overnight, Credit Suisse currently at the centre of the storm, its stock ending the European day some 24 per cent down,” he warned.

The S&P 500 index took a 0.7 per cent hit from the news and the Dow Jones index fell 0.9 per cent.

Markets across the world are plunging.

It comes as the CEO of major investment firm Blackrock said the collapse of Silicon Valley Bank could be the beginning of a “slow moving crisis”.

Credit Suisse Chairman Axel Lehmann told finance website Bloomberg on Wednesday that the bank would not need “state assistance” to stay afloat as it had “already taken the medicine”, referring to changes made after it reported an $8 billion loss for 2022.

The US Treasury Department said it was monitoring the situation at Credit Suisse.